KS
Kansas Senate Bill SB245

Kansas 2023-2024 Regular Session

Kansas Senate Bill SB245 Compare Versions

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11 Session of 2023
22 SENATE BILL No. 245
33 By Committee on Federal and State Affairs
44 2-13
55 AN ACT concerning financial institutions; enacting the commercial
66 financing disclosure act; requiring the disclosure of certain commercial
77 financing product transaction information; registration of commercial
88 finance brokers with the state bank commissioner; obtaining a surety
99 bond; providing for civil penalties; rules and regulations authority of
1010 the commissioner; authorizing enforcement of such act by the attorney
1111 general.
1212 Be it enacted by the Legislature of the State of Kansas:
1313 Section 1. (a) The provisions of sections 1 through 6, and
1414 amendments thereto, shall be known and may be cited as the commercial
1515 financing disclosure act.
1616 (b) For purposes of sections 1 through 6, and amendments thereto:
1717 (1) (A) "Account" means:
1818 (i) A right to payment of a monetary obligation, whether or not
1919 earned by performance, for:
2020 (a) Property that has been or is to be sold, leased, licensed, assigned
2121 or otherwise disposed of;
2222 (b) services rendered or to be rendered;
2323 (c) a policy of insurance issued or to be issued;
2424 (d) a secondary obligation incurred or to be incurred;
2525 (e) energy provided or to be provided;
2626 (f) the use or hire of a vessel under a charter or other contract;
2727 (g) arising out of the use of a credit card or charge card or
2828 information contained on or for the use with such card; or
2929 (h) winnings in a lottery or other game of chance operated or
3030 sponsored by a state, governmental unit of a state or person licensed or
3131 authorized to operate such lottery or game by a state or governmental unit
3232 of a state; and
3333 (ii) healthcare insurance receivables.
3434 (B) "Account" does not mean:
3535 (i) Rights to payment evidenced by chattel paper or an instrument;
3636 (ii) commercial tort claims;
3737 (iii) deposit accounts;
3838 (iv) investment property;
3939 (v) letter-of-credit rights or letters of credit; or
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7676 (vi) rights to payment for moneys advanced or sold other than rights
7777 arising out of the use of a credit card or charge card or information
7878 contained on or for use with such card.
7979 (2) "Accounts receivable purchase transaction" means any transaction
8080 in which a business forwards or otherwise sells to a provider all or a
8181 portion of accounts of such business or payment intangibles at a discount
8282 to the expected value of such accounts or payment intangibles. The
8383 provider's characterization of an accounts receivable purchase transaction
8484 as a purchase shall be conclusive that such accounts receivable purchase
8585 transaction is not a loan or a transaction for the use, forbearance or
8686 detention of money.
8787 (3) "Act" means the commercial financing disclosure act.
8888 (4) "Broker" means any person who, for compensation or the
8989 expectation of compensation:
9090 (A) Arranges a commercial financing product transaction between a
9191 third party that, if executed, such transaction would be binding upon such
9292 third party; and
9393 (B) communicates such transaction to a business in this state.
9494 "Broker" does not include a provider or any individual or entity whose
9595 compensation is not based or dependent upon the terms of the specific
9696 commercial financing product obtained or offered.
9797 (5) "Business" means an individual, group of individuals, sole
9898 proprietorship, corporation, limited liability company, trust, estate,
9999 cooperative, association, limited partnership or general partnership
100100 engaged in a business activity.
101101 (6) "Business purpose transaction" means any transaction in which
102102 the proceeds resulting therefrom are provided to a business or are intended
103103 to be used to carry on a business and are not for personal, family or
104104 household purposes. A provider may rely on any written statement of
105105 intended purpose signed by a business to determine whether such
106106 transaction is a "business purpose transaction". Such written statement
107107 may be a separate statement or may be contained in an application,
108108 agreement or other document signed by such business or the owner of such
109109 business.
110110 (7) "Commercial financing product" means any commercial loan,
111111 accounts receivable purchase transaction and commercial open-end credit
112112 plan when the transaction is a business purpose transaction.
113113 (8) "Commercial loan" means a loan to a business, whether secured
114114 or unsecured.
115115 (9) "Commercial open-end credit plan" means commercial financing
116116 extended by a provider under a plan in which:
117117 (A) The provider reasonably contemplates repeat transactions; and
118118 (B) subject to any limit set by the provider, the amount of financing
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162162 that such provider may extend to the business during the term of the plan
163163 is made available to the extent that any outstanding balance is repaid.
164164 (10) "Commissioner" means the state bank commissioner or the
165165 commissioner's designee, who shall be the deputy commissioner of the
166166 consumer and mortgage lending division of the office of the state bank
167167 commissioner.
168168 (11) "Depository institution" means a bank, trust company, industrial
169169 loan company, savings and loan association, savings bank or credit union
170170 doing business under the authority of a license, certificate or charter issued
171171 by the United States, this state or any other state and that is authorized to
172172 transact business in this state.
173173 (12) "General intangible" means any personal property, including
174174 things in action, other than accounts, chattel paper, commercial tort claims,
175175 deposit accounts, documents, goods, instruments, investment property,
176176 letter-of-credit rights, letters of credit, money and oil, gas or other minerals
177177 before extraction. "General intangible" includes payment intangibles and
178178 software.
179179 (13) "Payment intangible" means a general intangible under which
180180 the account debtor's principal obligation is a monetary obligation.
181181 (14) "Person" means any individual, firm, company, partnership,
182182 corporation or association.
183183 (15) "Provider" means a person who consummates more than five
184184 commercial financing product transactions to a business located in this
185185 state in a calendar year. "Provider" includes a person that enters into a
186186 written agreement with a depository institution to arrange for the extension
187187 of a commercial financing product by such depository institution to a
188188 business through an online lending platform administered by such person.
189189 Sec. 2. (a) Before consummating a commercial financing product
190190 transaction, a provider shall disclose to the business the terms of such
191191 commercial financing product in accordance with the provisions of this
192192 section. Only one disclosure shall be required for each commercial
193193 financing product, and disclosure shall not be required when modification,
194194 forbearance or change to a consummated commercial financing product
195195 occurs.
196196 (b) A provider shall disclose with each commercial financing product:
197197 (1) The total amount of funds provided to the business under the
198198 terms of such commercial financing product. Such disclosure shall be
199199 labeled "total amount of funds provided";
200200 (2) the total amount of funds disbursed to such business under the
201201 terms of such commercial financing product if less than the total amount
202202 of funds provided under paragraph (1). Such disclosure shall be labeled
203203 "total amount of funds disbursed";
204204 (3) the total amount to be paid to such provider pursuant to such
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248248 commercial financing product agreement. Such disclosure shall be labeled
249249 "total of payments";
250250 (4) the total dollar cost of such commercial financing product under
251251 the terms of the agreement, which shall be determined by subtracting the
252252 total amount of funds provided from the total of payments. Such
253253 calculation shall include any fees or charges deducted by the provider from
254254 the amount under paragraph (1). Such disclosure shall be labeled "total
255255 dollar cost of financing";
256256 (5) the manner, frequency and amount of each payment. Such
257257 disclosure shall be labeled "payments". If such payments vary, the provider
258258 shall instead disclose the manner, frequency and the estimated amount of
259259 the initial payment and shall label such disclosure as "estimated
260260 payments." The commercial financing product agreement shall include a
261261 description of the methodology for calculating any variable payment and
262262 the circumstances for when payments may vary; and
263263 (6) a statement of whether there are any costs or discounts associated
264264 with prepayment of such commercial financing product, including a
265265 reference to the paragraph in such agreement that creates the contractual
266266 right to prepayment. Such disclosure shall be labeled "prepayment".
267267 Sec. 3. The provisions of this act shall not apply to a:
268268 (a) Provider that is a depository institution or a subsidiary or service
269269 corporation that is:
270270 (1) Owned and controlled by a depository institution; and
271271 (2) regulated by a federal banking agency;
272272 (b) provider that is a lender regulated under the federal farm credit
273273 act, 12 U.S.C. § 2001 et seq.;
274274 (c) commercial financing product that is:
275275 (1) Secured by real property;
276276 (2) a lease; or
277277 (3) a purchase money obligation that is incurred as all or part of the
278278 price of the collateral or for value given to enable the business to acquire
279279 rights in or the use of such collateral if such value is so used;
280280 (d) commercial financing product in which the recipient is a motor
281281 vehicle dealer or a vehicle rental company, or an affiliate of a motor
282282 vehicle dealer or vehicle rental company, pursuant to a commercial loan or
283283 commercial open-end credit plan of at least $50,000 or a commercial
284284 financing product offered by a person in connection with the sale or lease
285285 of products or services that such person manufactures, licenses or
286286 distributes or whose parent company or any of such parent company's
287287 directly or indirectly owned and controlled subsidiaries manufactures,
288288 licenses or distributes;
289289 (e) provider that is licensed as a money transmitter in accordance
290290 with the Kansas money transmitter act or the law of any other state,
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334334 district, territory or commonwealth of the United States; or
335335 (f) provider that consummates no more than five commercial
336336 financing product transactions in this state in a 12-month period.
337337 Sec. 4. (a) No person shall engage in business as a commercial
338338 financing broker in this state unless prior to conducting such business,
339339 such person files for registration with the commissioner. Such registration
340340 shall be effective upon receipt by the commissioner of a completed
341341 registration form and the required registration fee.
342342 (b) After filing an initial registration form, a broker shall file a
343343 renewal registration form on or before January 31 of each year along with
344344 the required renewal fee.
345345 (c) A broker shall pay a $100 registration fee upon the filing of an
346346 initial registration and shall pay a $50 renewal fee upon the filing of a
347347 renewal registration.
348348 (d) The registration form shall include:
349349 (1) The name of the broker;
350350 (2) the name with which the broker is doing business if different than
351351 the name provided in paragraph (1);
352352 (3) the address of the broker's principal office, regardless of whether
353353 located in this state or outside of this state;
354354 (4) whether any officer, director, manager, operator or principal of the
355355 broker has been convicted of a felony involving an act of fraud,
356356 dishonesty, breach of trust or money laundering; and
357357 (5) the name and address of a designated agent in this state upon
358358 whom service of process may be made.
359359 (e) If any information required by the registration form changes or
360360 becomes inaccurate after filing, the broker shall not be required to file a
361361 further registration form prior to the time of renewal.
362362 (f) Every broker shall obtain a surety bond issued by a surety
363363 company authorized to do business in this state. The amount of such bond
364364 shall be $10,000. Such bond shall be in favor of the state of Kansas. Any
365365 person damaged by the broker's breach of contract or of any obligation
366366 arising therefrom, or by any violation of this act, may bring an action
367367 against such bond to recover damages suffered. The aggregate liability of
368368 the surety shall be only for actual damages and shall not exceed the
369369 amount of such bond.
370370 (g) Employees regularly employed by a broker that has complied with
371371 this act shall not be required to file a registration or obtain a surety bond
372372 when acting within the scope of employment for the broker.
373373 Sec. 5. (a) Violations of the provisions of this act shall be punishable
374374 by a civil penalty of $500 per violation, but not to exceed $20,000 for all
375375 aggregated violations. Any person who violates the provisions of this act
376376 after receiving written notice of a prior violation from the attorney general
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420420 shall be punishable by a civil penalty of $1,000 per violation, but not to
421421 exceed $50,000 for aggregated violations.
422422 (b) Violations of this act shall not affect the enforceability or validity
423423 of the underlying agreement.
424424 (c) This act shall not create a private right of action against any
425425 person based upon compliance or noncompliance with the provisions of
426426 this act.
427427 (d) Authority to enforce compliance with this act shall be vested
428428 exclusively with the attorney general.
429429 Sec. 6. The commissioner shall adopt rules and regulations to
430430 implement the provisions of this act. Such rules and regulations shall be
431431 adopted on or before January 1, 2024.
432432 Sec. 7. This act shall take effect and be in force from and after its
433433 publication in the statute book.
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